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    Merton Value of Equity Formula

    Hi, I have seen the Merton value of equity formula given as: However in the text, it is provided as follows: What is the significance of the Pt(T) variable? It is defined as the price of a $1 0 coupon bond that matures at time T. Does it act as some kind of discount factor?
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    Model 3 and 4

    Hi, I tried to search Model 3 but the search didn't come up with anything meaningful. Models 3 and 4 both have an alpha factor in them, yet the text doesn't define what alpha is. So what does this alpha factor represent and are we expected to derive it on the exam or will it be provided...
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    BT Pass Rates

    I was looking at the pass rate info from the homepage link, and the data only goes up to 2014. Is there updated information somewhere? I am just curious to see what they are now since it seems like the exams have gotten much tougher.
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    Which Basel capital ratio/ CI / etc

    Hi, In the materials we are provided with Basel II, Basel II.5, Basel III - so if we are asked to determine whether a capital ratio is adequate are we supposed to assume fully phased in Basel III, meaning to include the countercyclical and other buffers? Also, it seems like Basel II.5 is...
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    It says In addition, as individual capital commitments to a hedge fund manager tend to be small in relation to the investor’s overall portfolio, it is critical that a hedge fund investment carries the same limited liability protection as buying shares of a...
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    Stulz Ch 18 - Total Return Swap

    Hi all, Can someone explain why the bank gets paid whether or not the bank defaults or not? They receive $20 million, which is the difference between the value at maturity and the value of the debt at t=0. If the debt defaults, they get $30 million which is the difference betweeen the value...
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    FAQ Before Exam Suggestion for future practice question PDFs

    Hi, I would like to make a suggestion for future practice question PDFs - is it possible to include the question stem and answer choices int he answer explanations? It is a PITA to scroll back and forth especially on a mobile device. The GARP practice exam PDFs already follow this format...
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    2 Asset Portfolio VaR

    Hi, We are given the following 2 asset portfolio VaR formula: If no weights are given, how does the above formula change? Or is it just easier to calculate weights?
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    Practice Question Count For Part 2

    Hello, Does anyone have a count for the Part 2 practice questions? I just want to get an approximation to track my progress and ensure I stay on schedule
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    One last question....delta normal vs full revaluation

    I read somewhere that the full revaluation VaR will be underestimated compared to linear approximation. How is this possible? I thought delta normal VaR underestimates due to the convex nature of options
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    Any easier way to remember option greek relationships?

    The examples in the notes are pretty good, but they are only for the Euro call option. Just wondering if there is an easier way to keep things straight as I'm fearful GARP will throw a put option question from left field. For European call: delta increases with price, increases with maturity...
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    Difference between probability density function and inverse cumulative distribution function?

    What is the difference between probability density function and inverse cumulative distribution function, if any? They both look the same
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    Key Rate 01 Spreadsheet?

    Is there a spreadsheet that covers the Tuckman Key Rate 01, Partial 01 and Partial Buckets concepts?
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    Error in Tuckman Text?

    On page 172 of the Tuckman reading of Book 4, it states: "In figures 9-2 and 9-3, for any given maturity, zero-coupon yields exceed par yields, which, in turn, exceed the 9% coupon yields." If you look at figures 9-2 and 9-3, the par yield of the C-STRIPS are greater than both the zero coupon...
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    Continuous uniform distribution formula

    We are provided with the following CDF formula for a continuous uniform distribution: (a-b1)/(b2-b1) If b1 represents the lower bound, per the reading, then what does a represent?
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    Present value of forward formula

    Hello I tried searching the forum but couldn't find any related thread. In the BT slides, the value of a forward is given as: F0=(S0-K)e^rT However, in Hull there is a version presented as: F0=S0e^-qT-Ke^-rT It's kind of confusing because in Hull, the top formula is the value of a forward...
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    Using the TI-BA II Plus to calculate variance and SD

    Hello My TI BA II Plus calculator can automatically calculate SD & variance using the STAT & DATA functions. Are we expected to calculate by hand? Seeing as how FRM likes to throw curveball questions, could they throw in a var/SD question that would require a by hand approach?
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    Saunders Ch. 13 Q&A 5

    Hello, I came across this question: 5.. The spot foreign currency exchange rate is EUR/USD $1.4296/$1.4304. Each of the following is true about this quote except: a) The spread is 8 pips b) If the domestic currency is the US dollar (USD), from the perspective of an American trader, as EUR is...
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    FAQ Exam Answer dependency & calculator decimals

    Hi, Two quick questions about the exam: 1. I noticed in a lot of the questions, the answer of the first question is required to answer the next question. Is the FRM exam structured like this? 2. What is the recommended decimal usage for the calculator?